BWX Technologies(BWXT) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2021, reflect asset growth, flat Q2 revenues with decreased net income, and stable operating cash flow alongside increased investing activities Condensed Consolidated Balance Sheets The balance sheets as of June 30, 2021, show total assets increased to $2.57 billion, total liabilities to $1.86 billion, and stockholders' equity to $709.1 million, reflecting changes in cash, property, and debt classification Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $922,652 | $773,598 | | Total Assets | $2,566,402 | $2,293,503 | | Total Current Liabilities | $801,643 | $529,727 | | Total Liabilities | $1,857,315 | $1,675,735 | | Total Stockholders' Equity | $709,087 | $617,768 | Condensed Consolidated Statements of Income For Q2 2021, revenues remained flat at $505.1 million, while operating income decreased to $73.8 million and net income to $59.3 million, with similar trends observed for the six-month period Key Income Statement Data (in thousands, except per share amounts) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $505,099 | $504,520 | $1,033,372 | $1,046,728 | | Operating Income | $73,751 | $82,434 | $156,165 | $180,701 | | Net Income Attributable to BWXT | $59,347 | $64,258 | $129,096 | $139,757 | | Diluted EPS | $0.62 | $0.67 | $1.35 | $1.46 | Condensed Consolidated Statements of Comprehensive Income Total comprehensive income for Q2 2021 increased to $67.4 million, primarily driven by favorable currency translation adjustments that offset lower net income, with a similar trend for the six-month period - Favorable currency translation adjustments were the primary driver of higher comprehensive income in both the three and six-month periods of 2021 compared to 2020, despite lower net income[27] Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $709.1 million as of June 30, 2021, primarily driven by net income, partially offset by dividends declared - The primary drivers for the change in stockholders' equity during the first half of 2021 were net income and dividends declared[29] Condensed Consolidated Statements of Cash Flows For the first six months of 2021, net cash from operations slightly increased to $158.3 million, while investing activities used more cash at $169.6 million, and financing activities shifted to a $159.4 million inflow due to increased debt borrowings Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $158,323 | $155,630 | | Net Cash used in Investing Activities | ($169,602) | ($129,417) | | Net Cash from (used in) Financing Activities | $159,422 | ($50,367) | Notes to Condensed Consolidated Financial Statements The notes detail the company's three nuclear segments, revenue recognition methods, effective tax rate, recent debt issuance, and a total remaining performance obligation (backlog) of $4.85 billion - The company operates in three reportable segments: Nuclear Operations Group, Nuclear Power Group, and Nuclear Services Group[37] Remaining Performance Obligations by Segment (in millions) | Segment | 2021 (Remainder) | 2022 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | | Nuclear Operations Group | $825 | $1,235 | $2,073 | $4,133 | | Nuclear Power Group | $179 | $202 | $293 | $674 | | Nuclear Services Group | $36 | $6 | $0 | $42 | | Total | $1,040 | $1,443 | $2,366 | $4,849 | Segment Revenues and Operating Income - H1 2021 vs H1 2020 (in thousands) | Segment | Revenues H1 2021 | Revenues H1 2020 | Operating Income H1 2021 | Operating Income H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Nuclear Operations Group | $783,410 | $834,027 | $143,517 | $176,331 | | Nuclear Power Group | $209,240 | $155,900 | $21,158 | $9,572 | | Nuclear Services Group | $55,617 | $70,093 | $11,507 | $10,522 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported flat Q2 2021 revenues, a decline in operating income primarily from the Nuclear Operations Group, growth in backlog to $4.8 billion, and affirmed strong liquidity after recent debt refinancing, while managing COVID-19 impacts as an essential business COVID-19 Assessment Designated an essential business, the company continued operations with health precautions, utilizing government assistance including $21.4 million in deferred U.S. payroll taxes and $3.3 million from the Canada Emergency Wage Subsidy in Q2 2021 - The company was designated as an essential business in the U.S. and Canada, allowing for continued operations during the pandemic[113] - As of June 30, 2021, the company has deferred $21.4 million in U.S. payroll tax payments under the CARES Act[115] - The company recognized $3.3 million and $4.2 million of subsidies under the Canada Emergency Wage Subsidy (CEWS) during the three and six months ended June 30, 2021, respectively[115] Consolidated Results of Operations Consolidated revenues for Q2 2021 were flat, while operating income declined to $73.8 million, with similar trends for H1 2021 primarily due to lower Nuclear Operations Group performance partially offset by Nuclear Power Group growth Consolidated Results Summary (in thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $505,099 | $504,520 | $1,033,372 | $1,046,728 | | Operating Income | $73,751 | $82,434 | $156,165 | $180,701 | Backlog Total company backlog increased to $4.85 billion at the end of Q2 2021, primarily driven by the Nuclear Operations Group, with an additional $1.5 billion in unexercised options not included Backlog by Segment (in millions) | Segment | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Nuclear Operations Group | $4,133 | $3,659 | | Nuclear Power Group | $674 | $726 | | Nuclear Services Group | $42 | $21 | | Total Backlog | $4,849 | $4,406 | - In March 2021, the company received U.S. Government awards valued at a combined $2.2 billion, with approximately $1.1 billion added to backlog as of June 30, 2021[151] - An additional $1.5 billion in unexercised options was excluded from the backlog as of June 30, 2021[152] Liquidity and Capital Resources The company maintains strong liquidity with $720.5 million available under its credit facility, having issued $400 million in new senior notes and subsequently redeemed older notes, ensuring sufficient funding for the next 12 months - The company has a $750 million senior secured revolving credit facility maturing in March 2025, with $720.5 million available as of June 30, 2021[153][161] - In April 2021, the company issued $400 million of 4.125% Senior Notes due 2029[73][170] - On July 15, 2021, after the quarter ended, the company redeemed the entire $400 million principal of its 5.375% Senior Notes due 2026, incurring a $10.8 million premium[78][164] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes to its market risk exposures compared to those disclosed in its 2020 Annual Report on Form 10-K - There have been no material changes to the company's market risk exposures since the 2020 10-K filing[185] Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[187] - No material changes to internal control over financial reporting occurred during the second quarter of 2021[187] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company reported no material legal proceedings or contingencies for the period, as referenced in Note 6 of its financial statements - There were no material legal proceedings or contingencies reported for the period[80][190] Item 1A. Risk Factors The company reported no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors were reported from those disclosed in the 2020 10-K[191] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2021, the company repurchased 874 shares for employee tax obligations, and the Board authorized a new $500 million share repurchase program with no expiration date - On April 30, 2021, the Board of Directors authorized a new share repurchase program for up to $500 million with no expiration date[193] - No shares were repurchased during Q2 2021 as part of the publicly announced plans; the 874 shares repurchased were to satisfy employee tax obligations[193] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the indenture for the 4.125% Senior Notes due 2029 and required CEO and CFO certifications - Key exhibits filed include the indenture for the new Senior Notes due 2029 and required certifications by the CEO and CFO[195]